Apple's online iTunes store dodges music royalty hike

AGENCIESOct 3, 2008, 07.39am IST

SAN FRANCISCO: Apple dodged a potentially deadly financial bullet on Thursday when US judges held steady on digital music royalties paid by iTunes online shop.

The Copyright Royalty Board rejected a push by music publishers to get a bigger bite of the money Apple charges for digitized songs at iTunes. The board also didn't endorse a lowering of royalty rates backed by Apple.

Publishers will continue to get nine of the 99 cents iTunes charges per song. They had petitioned the board to raise their cut to 15 cents.

ITunes vice president Eddy Cue said in testimony to the board that raising prices to cover increased royalty fees would cause song sales to plummet and if Apple absorbs a fee hike it would probably operate at a loss.

"Apple has repeatedly made clear it is in the business to make money and most likely would not continue to operate iTunes store if it were no longer possible to do so profitably," Cue said in court documents.

ITunes song sales topped five bn in June and the northern California firm's iconic chief executive Steve Jobs touts the online shop as the biggest music store in the United States.

The iTunes catalogue lists more than eight million songs.

Apple is fighting for a slight reduction in the royalty fee, saying that competition and piracy threats call for ongoing spending on research and technology.

"This is a risky business with small margins that can ill afford to be freighted with additional costs," Cue said in court documents.

"This industry needs reduced, not increased, costs in order to attract the investments necessary to its growth and stability."